Japan's core inflation accelerates, keeps BOJ rate-hike chance alive
November core CPI rises 2.7% yr/yr vs forecast +2.6%
Index excluding fuel rises 2.4% yr/yr vs +2.3% in October
Data comes in wake of BOJ's decision to keep rates steady
Adds graphic link
By Leika Kihara
TOKYO, Dec 20 (Reuters) -Japan's core inflation accelerated in November as rising food and fuel costs hit households, data showed on Friday, keeping the central bank under pressure to raise interest rates.
The data, which came in the wake of the Bank of Japan's decision to maintain interest rates at 0.25% on Thursday, highlights broadening inflationary pressure that could prod the bank to raise borrowing costs further.
Renewed yen declines could pressure prices higher by pushing up import costs. The BOJ's decision to stand pat and Governor Kazuo Ueda's dovish comments drove the dollar to a five-month high of 157.80 yen JPY=EBS on Friday.
The nationwide core consumer price index (CPI), which includes oil products but excludes fresh food prices, rose 2.7% in November from a year earlier, government data showed, roughly in line with a median market forecast for a 2.6% gain.
It accelerated from a 2.3% rise in October due partly to stubbornly high prices of rice and the phase-out of government subsidies to curb utility bills.
"November's surge in inflation wasn't a surprise," Capital Economics wrote in a research note. "The Bank of Japan will have known it was on the cards when it decided not to hike rates yesterday. But it should add to the Bank's confidence that it can resume rate hikes over the months ahead," it said.
A separate index that strips away the effects of volatile fresh food and fuel, scrutinised by the BOJ as a better gauge of demand-driven inflation, rose 2.4% in November from a year earlier after a 2.3% gain in October.
Service-sector inflation was steady at 1.5% in a sign firms continued to pass on rising labour costs, the data showed.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July on the view Japan was on the cusp of durably achieving its 2% inflation target.
It has stressed the BOJ's readiness to raise rates again if Japan continues to make progress in durably achieving its price target backed by domestic demand and sustained wage gains.
Ueda said on Thursday the BOJ needed more information to hike rates again, stressing the need for clarity on next year's wage growth and incoming U.S. president Donald Trump's economic policies.
"Given the (BOJ's) assessment that import price rises are subsiding, it's hard to expect the BOJ to hike rates in January," said Naoya Hasegawa, chief bond strategist at Okasan Securities, who projects a hike in March. "Most market players likely viewed Ueda's news conference as quite dovish," he said.
Japan's core inflation accelerates https://reut.rs/3BDv1pk
Reporting by Leika Kihara; Editing by Sam Holmes
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
